Two people start by trading the stock markets. After one month, one day-trader went broke / bust, while the other day trader returned a 20% profit. Have you ever wondered, as I have, what makes this kind of difference in people's trading? It is not always a native intelligence, talent or dedication. It is not that one person wants success and the other does not. The difference lies within the psychology of the brain. Your psychological mind set is likely to play a larger role in your trading career than anything else associated with your day-to-day practice.

Here are some good examples: One person looks at a glass ½ empty, while the other personality looks at that same cup as ½ full. Someone may look at problems and call them stress, while another individual looks at troubles as challenges. Another one may look at a ship in a storm as an adventurous roller coaster ride, while another human being sees the same situation as a hurricane that has a death call.

I am not the only one to discover this… In his book, "Trade Your Way to Financial Freedom", the renowned American psychologist Dr. Van Tharp discusses the role psychology plays in trading success. He divides trading into three Ingredients. SystemMoney Management, and Psychology of thought and emotion. Tharp discovered that the trader's psychology make up of the mind has a lot to do with his success than anything else does. In short, the psychology of the mind refers to your thinking and emotional actions and responses to any given situation…In trading, fear, greed, vanity, pride, hope, jealousy, denial - all these can affect investment decisions. Although, your aim in the market is to maximize your profit and minimize your risk, thinking and emotions often make this easier said than done. FOR EXAMPLE - Traders, who cannot control the psychological process of thought and emotion, make the wrong decision - such as the common amateur mistake of holding a losing position in the belief that someday it will become a winner. Loss aversion is a classic mistake. By nature, humans value a loss. Therefore, you suffer almost twice as much pain losing $1 as you would in gaining $1. Loss aversion compels most traders to hold a losing stock while it plummets downward. This clouded judgment clearly contradicts the trading adage: cut your losses and let your profits run. Emotional investors hold losing positions because they view paper losses differently from realized losses. An investor also engages in other forms of irrational behavior. This is what opens up problems for new traders, and then they lose manage money very quickly in the markets. Most people completely wiped out their finances within the first year of trading. So, as you can see, your thinking and emotions play a big part in determining whether you fail or succeed, but did you know that thought and emotion make up two different spheres pertaining to trading success?

What are the 5 Biggest Mistakes Traders & Investors Make!

1)Trading against the major trend - Fighting the momentum of the market. Not knowing the direction of the major trend and how to accurately define a change in trend direction. Not knowing how to strategically time market entry and exit. 2)Holding losing positions too long - Failure to accept losses as part of the trading process. Associating losses with being wrong or losing. Not knowing when to get out of a market that has signalled a change in trend to limit losses. 3)Exiting profitable trades too early - Fear of losing unrealised profits. Trying to outsmart the markets by getting out on a presumed extreme price, then missing the big trends when they occur. Not knowing when to hold a winning position to maximize gains. 4)Trading too big - Trying to make too much, too quickly. Allocating too much capital to one position, exposing the account to excessive risk and reducing the protection from balance and diversification. Not knowing or not managing the risk. 5)Trading too often - Over-trading or "churning" the account. "Day Trading" falls into this category if the total transaction fees (commissions) are too high relative to your account size. Not controlling the costs in trading.

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